More delays ahead for imported coal-based UMPPs?

The ministry has said it can give environment clearance only after knowing the source of the coal to be used for the project, which would be fixed by the developer and the Letter of Authorisation is placed

NEW DELHI: Imported coal based Ultra Mega Power Projects are likely to face some delay with the Ministry of Environment and Forests (MoEF) saying it will allow environment clearance only after the developer of the project signs a Memorandum of Understanding with the coal supplier.

The ministry has said it can give environment clearance only after knowing the source of the coal to be used for the project, which would be fixed by the developer and the Letter of Authorisation is placed.

“This is not the provision in the standard bidding document. The process is to bid out the project after securing all the basic clearances,” an official in the know of the development said. The environment ministry’s stand is not in line with the “plug-and-play” mode of project award announced by finance minister Arun Jaitley in the last budget.

Jaitley had said all UMPPs will be awarded with all necessary clearances – land, environment clearance and evacuation. An earlier attempt by the government to bid out the UMPP two years ago had failed due to lack of interest from the private sector. Barring bids from NTPC, all the others were withdrawn by private players citing issues related to clearances.

Currently, the government plans to bid out imported coal-based Cheyyur UMPP in Tamil Nadu along with domestic coal based projects at Bedabahal in Odisha and at Banka in Bihar.

The environment ministry raised its points after the standard bidding document for the projects was shared for inter-ministerial consultation. “If one goes by the recommendations of the environment ministry, some changes have to be made in the documents,” the official quoted above added.

If new norms are introduced in the bidding guidelines, it could further delay the awarding process. The power ministry had in December 2015 released the draft guidelines for awarding imported coal-based 4,000-megawatt UMPPs which had proposed pass-through of variations in input cost to the final consumer.

Last month, the finance ministry had sought a presentation on the feasibility of power projects running on imported coal from the power ministry, including those of UMPPs, expressing concern that cost of such projects could be subject to changes in law internationally.

The finance ministry had said this could lead to developers seeking changes in tariff which could in turn go against the provisions in the power purchase agreements.